Summary: This is the first post in our “Legacy” series, which focuses on how to help our children learn about wealth and money. In this article, we cover why you should speak to your children about money and how to go about doing it in a way that resonates with them throughout their lives.
A couple of weeks ago, I saw a post in a physician’s group from a parent whose child was asking about how much salary the parent made. The physician in the post was clearly reluctant to talk about money with her child. And, not surprisingly, some of the replies to the poster reinforced the idea that money should not be discussed with children.
I, along with a few of the other people who replied, had a totally different reaction to the child’s question. To me, this looked like a great opportunity to sit down and talk broadly about money, working vs. investing, spending within your means, and budgeting.
Not surprisingly, I’m that same parent who has been talking to our three-year-old daughter about how she needs to earn money for the ticket she wants to the coveted “Baby Shark Concert.”
I think most of us would agree children do not come out of school with an adequate financial education. So it’s up to us to start teaching this at home. But what subjects to cover and when to cover them does get a little confusing. In this post, I’ll try to lay down some of the basics, so we can delve into more details in future posts.
Why it’s important to speak to your kids about money
Kenji and I may be on the end of the spectrum here, but we do not believe that money is inherently a shameful subject.
The exchange of money for goods has been a natural part of human societies for thousands of years. The problem is that having, or not having money, has become a culturally-loaded state.
So people are hesitant to discuss how much money they have or don’t have for fear of judgment. The result of this is that people don’t discuss money in polite society, and it becomes a shameful taboo subject.
And yet, people are always thinking about money. And the very people who don’t have much of it, maybe even think about it more, because they’re constantly struggling with the lack of it.
The whole situation is really quite convoluted.
To us, though, it boils down to this: by avoiding talking about money with your kids, you don’t make its importance go away. Your children will still be exposed to seeing other people’s and your spending. They’ll notice that some people seem to have more money than others.
Besides, if you don’t speak to your kids about money, someone else will. That person might be a celebrity, who imparts his/her values in a TV show, or perhaps a future boyfriend or girlfriend who passes on terrible habits to your future adult child.
All you’re doing by not teaching your child about money is just avoiding having to deal with it. You’re ultimately setting your children up to go out into the world without knowing basic concepts and understanding of how the financial world works.
And that is a shame. Because if your child does not understand the basic tenets of how money works, how to make money and how to spend (or not spend) it, he/she will be in for a much more difficult life.
And that’s something I’m sure we can all get behind avoiding.
How to do it
So how should you talk to your kids about money?
We don’t propose to be experts here, but we have a few ideas that we’ve been putting in practice for the last several years with Kenji’s daughter/my step-daughter, who turned 16 this year. And, as I mentioned above, we’ve already started talking to our three-year-old about money too.
So what are some of the things we try to do?
We try to be straightforward and open in our discussions of money. We don’t hide the details. We answer questions with honesty. We’re not embarrassed by questions of amounts. And, we do not want to impart shame in the discussion because we want to facilitate an ongoing and transparent pattern of communication.
It’s inevitable that our children are going to have to think about money more and more as they get older and have to make more and more spending decisions on their own. We want them to start learning now in a very open, honest way so they are better able to avoid problems with money (or the lack thereof) in the future.
We try to be age appropriate.
What we talk about with our three-year-old clearly differs from what we discuss with our 16-year-old. Right now, we play Robert Kiyosaki’s Cash Flow game with our 16-year-old and spend a lot of time talking to her about assets vs liabilities.
Our three-year-old, on the other hand, is learning about how you can work at a job to earn money. We’ve also started speaking to her about how things she breaks cost money, so they will not be replaced.
We are trying to teach her to treat things with respect. Clearly, we’re not always going to be successful the first or even third time we cover a concept. This is an ongoing, lifetime discussion that changes as our children grow.
When we talk about money with our kids, we make it part of a normal discussion, not a big sit-down deal. This is in part because we’re often taking our children to our rental properties.
We’ve also been lucky enough to have lots of in-depth conversations about complex subjects like cash flow, types of appreciation and passive and active income.
These discussions just ebb and flow as they see us doing work on our properties or over-hear us debating different choices. In this way, our children get exposed to financial discussion almost on a daily basis.
Finally, we make sure to talk about important concepts. We cover subjects such as saving, budgeting, working hard (and letting your money work hard for you!), and giving and contribution.
We talk about goal-setting.
We talk about the value of time over money.
We talk about the good that people can do with money and the bad that people do with it.
We cover a range of subjects, but we try to make sure that, in the end, our children understand that money is all about what you chose to do with it. It is not by itself inherently bad. In fact, by having money, you can be a force for good in the world.
So, now that I’ve shared our ideas and practices about talking to kids about money, maybe you’ll share your thoughts.
Do you think it’s important to talk to your kids about finances? What do you teach your kids about money?
